The disgraced FTX founder has been proclaiming his innocence and incompetence for two months. Today, he'll walk into federal court and do it for real.
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If you're expecting fireworks and exciting new developments when disgraced FTX founder Sam Bankman-Fried appears in court today, you'll be disappointed. But it's still a momentous event.
After weeks of tweets and high-profile interviews in which he claimed over and over that he had not even the most basic knowledge of what was happening at his companies or how much money they had to even the closest billion dollars, the Sam Bankman-Fried "I'm an idiot, not a crook" press junket is at an end.
At 2 p.m. ET on Tuesday, Jan. 3, Bankman-Fried will walk into courtroom 21B of the federal courthouse at 500 Pearl Street in Lower Manhattan, stand up in court before Judge Lewis Kaplan of the Southern District of New York, and say whether he is guilty or not guilty of eight counts that could see him in jail for the rest of his life.
By illegally and secretly transferring billions of dollars in crypto owned by some one million FTX exchange customers to his private trading firm Alameda Research, the eight-count indictment said, in part:
"Bankman-Fried, along with others, engaged in a scheme to defraud customers of FTX.com by misappropriating those customers' deposits, and using those deposits to pay expenses and debts of Alameda Research, Bankman-Fried's proprietary crypto hedge fund, and to make investments."
As arraignments go, there's not much more to it, assuming he pleads not guilty to all counts. Which is as near to a certainty as you get in the legal system. Even if he intends to plead guilty, a not guilty plea at the arraignment kicks off the discovery process, allowing Bankman-Fried's lawyers a look into the prosecution's case. That means what evidence they have and especially what the prosecution's two star witnesses have told them as part of their own plea deals.
Alameda Research CEO Caroline Ellison, reportedly Bankman-Fried's on-again-off-again girlfriend, and Gary Wang, the co-founder and CTO of the FTX exchange, have pleaded guilty.
Both lived with Bankman-Fried in the luxury penthouse in The Bahamas in which the two firms, as well as FTX US and a web of more than 100 other companies and investment vehicles, were run.
Ellison pleaded guilty to two counts of wire fraud and five conspiracy counts covering wire fraud, securities and commodities fraud, and money laundering. Wang pleaded to wire fraud, securities fraud and commodities fraud. They were facing as much as 100 years and 50 years in jail respectively.
What Comes Next
That in turn lets Bankman-Fried's lawyers know what, if any, leverage they have to get a good plea deal for their client.
The answer is likely to be very little. Aside from the active support of at least two of his top lieutenants, the Department of Justice likely intends to set a precedent in an industry that they and other federal regulators believe plays fast and loose with the law.
Then there's the matter of Bankman-Fried's actively lobbying and courtship of top senators and representatives — including giving very large campaign contributions. One of the eight charges against Bankman-Fried involved violating campaign finance disclosure laws.
Beyond that, there's the swath of live interviews he gave the New York Times, Wall Street Journal and Good Morning America, in which he claimed to have no idea of what was going on at the firms that made him a multibillionaire. Among those, he said:
"I ask myself a lot how I made a series of mistakes that seem — they don't just seem dumb — they seem like the type of mistakes I could see myself having ridiculed someone else for having made."
Comments like that make a great counterpoint for juries.
In the first four counts of the indictment, Bankman-Fried is charged with conspiracy to commit wire fraud and committing wire fraud on customers and on lenders. That's followed by conspiracy to commit commodities fraud and securities fraud. The seventh count is money laundering as a part of that wire fraud.
The final charge is the campaign finance law violations involving giving campaign contributions above the maximum allowed by having others funnel the money to candidates as smaller donations.
